Options Trading News

January 11, 2013  Fri 9:44 AM CT

Safeway has reversed lower this morning, but a large trader sees a floor beneath the supermarket chain's stock.

optionMONSTER systems show that 7,538 June 15 puts have already changed hands, led by a block of 6,170 that was sold for $0.71. The volume was far higher than the previous open interest of just 299 contracts, so this is clearly a new position.

The put selling is a bet that SWY will hold above the $15 strike price in coming weeks. In collecting the $0.71 option premium, the trader is also willing to take the risk of buying shares at that level if they fall below it. (See our Education section)

SWY traded as high as $17.86 this morning but quickly lost ground and is now down 1.71 percent to $17.26. Shares had climbed to resistance at $18.50 last week, while the $15 level has been support since the stock hit a long-term intraday low of $14.73 in July.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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